Buried more deeply in posts like Part XII: Bonds, and their comment sections, I shared the fact that for the past several years my personal bond allocation was held in funds other than VBTLX.

This information was buried for several reasons:

Investing in these was an experiment.

As an experiment, this was not something I was prepared to (and still don’t) recommend.

But I wanted the information on the blog in the interest of full disclosure.

By burying it somewhat deeply, I figured only those readers who took the time to thoroughly read (including the comments) and understand the principles here would find it.

Those readers would be best able to decide for themselves whether following me down this particular rabbit hole made sense for them.

Who knows what other sneaky stuff I’ve buried around here…

The Experiment

Specifically those other funds were:

VFIDX

VICSX

Both are intermediate term corporate bond index funds.

At first glance, intermediate-term funds like these would seem an odd replacement for a total (short, intermediate and long term) fund like VBTLX. But with a total bond fund the short and long term bonds balance each other out and what you have is in fact an intermediate bond fund.

This experiment has been going on for about the past seven years, first with VFIDX and more recently with VICSX. The idea was to seek better yields with a little additional risk.

In this, it has been a splendid success. VFIDX has provided better returns and yields than VBTLX and VICSX in turn has done better than VFIDX.

To understand why I am now walking aways from them and returning to VBTLX, let’s first look at the underlining reasons as to why VFIDX and VICSX have outperformed and then let’s explore why we hold bonds in the first place.

The biggest difference in these funds is that VBTLX holds 64% of its portfolio in bonds from the US Government. VFIDX has less than 7% and VICSX virtually none.

In addition, for its corporate bonds, VFIDX reaches further down the quality ladder and VICSX further still. To be clear, these are not junk bond funds but their holdings are a bit less high quality than those of VBTLX. As we know from our bond post, in exchange for accepting more risk, lower quality bonds pay higher interest rates in order to attract investors.

Now because we always care about costs around here, let’s look at the Expense Ratios:

VBTLX — .05 ER

VFIDX — .10 ER

VICSX — .07 ER, plus a .25% purchase fee (Eek!)

While both VFIDX and VICSX carry higher costs, in both cases their increased yields covered these and then some.

This being the case, why would I turn my back on them now?

Why return to VBTLX?

It is important to realize that this outperformance has occurred during a period of time when falling interest rates and a stable economy has made for smooth sailing for bonds. Since defaults have been few, the risk/return balance has favored the lower quality, higher yielding choices. Indeed, a junk bond fund would have done even better.

Of course, we know some day the road will get rougher and that balance will shift. A price may well have to be paid for taking on that extra risk.

But the more important question is, Why do we hold bonds in the first place?

For those on The Simple Path described on this blog and in my book, it is to smooth the wild and volatile ride of stocks. We are not seeking performance from our bonds, we are seeking a counter-weight to our stocks.

From this perspective, VBTLX is the far better choice. The bond quality is higher and it holds government bonds. Both VFIDX and VICSX tie us to corporate bonds. That is, bonds issued by the same companies we own with our total stock market fund, VTSAX. In a major downturn some of those companies will be pushed to the wall. Some might even default on the bonds we hold from them at the same time their share prices a plummeting. Not a great counter-weight.

But what if…

But what if I don’t want to hold corporate bonds at all? Why not have a fund with only government bonds? Why not go that route?

But what if the extra potential reward is worth the risk to you? Does staying in VFIDX and/or VICSX make sense then?

Perhaps, but there are better ways to improve performance. The easiest is to simply shift a greater percentage of your asset allocation to stocks. In a bull market VTSAX will soundly trounce both VFIDX and VICSX. Bonds are simply not a great asset choice for maximum performance.

If you want to dial up your performance/volatility, increase your stock allocation. Bonds are for ballast.

So while this experiment has been fun and has worked out nicely for me, the time has come to fold it up and return to VBTLX. Time to let my bonds perform the role I own them for: Smoothing the ride.

Crash coming?

So. Wait.

JL is getting more conservative with his bond allocation. Is this his veiled warning to us the long-awaited crash is coming?

Nope.

As I have said repeatedly on this blog, no one can predict the market.

Over the weekend one of the news programs I watched featured two highly credentialed stock market experts. Both hold high-level positions in top name Wall Street firms. One made the case the market is far over extended and on the verge of collapse. The other, that the market is in the very early stages of a continuing historic rise. Both were articulate and made compelling arguments. One might even be right. Or the host could have found a third to predict, with equally confident reasoning, that the market will go sideways for the foreseeable future.

Easy for you to say, JL. But I’m sitting on a lump sum in cash and this market is at historic highs…

In fact, it was this lump sum investing chore that finally got me motivated also to move our bonds back to VBTLX, which I had been meaning to do for a while now. As long as I hold bonds going forward, this is where they will remain.

Insurance makes my eyes glaze over and I am a much harsher critic of life insurance (other than term) and annuities, but this guide is clear, simple and well done. Same with the one on estate planning. The investor outlook one is just for fun. Enjoy!

Note: If you click on any of the links in those three guides to sign up with Personal Capital, this blog will NOT receive its affiliate commission. Presumably, Personal Capital will be happy about that. If you want to see jlcollinsnh.com get paid, use this Personal Capital link or the one at the beginning of this section. That will make me happy. Either way, the tools are free to you so choose the link that makes you happy. 🙂

****************************************************

I’ve been made into a Lego and that’s a good thing, or so I’m told. The Eighth Day to be exact.

The first is the basic version and it is free. The second is the pro version for a small charge.

Since the Apple version has yet to be released, I confess I haven’t personally vetted these. But I do know Darrow and I respect his work and his way of thinking, and so feel confident presenting these to you.

For what it is worth, there is no affiliate relationship here and the blog doesn’t get paid if you decide to use them.

In the spirit of the Christmas Season, Darrow has given me a couple of codes for the Pro version to give to you. If you’d like one, say so in the comments. I will randomly and capriciously pick the winners with no sense of fairness or reason.

**************************************************************

Also in the spirit of the season, and without random capriciousness, I wish you and yours…

A Joyous and Peaceful Holiday

and

Happy, Healthy and Prosperous New Year!

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Comments

This is a perfectly timed article. My FIL just hit 60 and I am trying to convince him to pare back some of his risk and dip his toes into the water. I will definitely be showing him this article this weekend 🙂

Thanks for the good explanation of the different bond buckets and bringing back to the reason to use bonds…

After receiving your Chautauqua advice, I rolled two 401k’s and tiny pension from previous employers into my Vanguard rollover account…the second tiny pension is taking forever (sigh) to move but will hit in January. A modest percent of the money went into VBTLX and rest joined the bulk of my money in VTSAX. Even though I’m still in wealth acquisition phase, my personal risk allowance at my age says hedge a wee bit so there’s some nice boring bonds in there. It’s all simplified my book keeping as well!

thank you, Jim. You’ve reminded me why I own bonds. I’m going to follow your lead and move all into VBTLX. Thanks for all the guidance over the years. Changed my family’s future for the better. We’re on pace to be FI in two years.

Jim, thanks as alway s for sharing your experience with us! Your insight is always very helpful to me. I have a few questions if you don’t mind.

1. What was your stock/bond allocation before and after all the transactions you reference in this post?

2. This market is at historic highs based on Shiller’s CAPE (it’s second highest in history at 32), all time high for the market cap to GDP ratio (“the Buffett Yardstick”), and Bogle’s adjusted Expected Returns Formula for the next 10-years is currently calling for less than 4% gross returns for equities (Note: the worst average annual returns in history over any 10-year period were 2.5%). I’m curious what you might change your stock/bond allocation to A. if the Shiller PE hit 45 as it almost did in 2000 and B. If Shiller’s PE dropped below 10 as it occasionally does. C. Do you think it’s wise to consider making weighting changes at times like these (PE of 45 or 10) or do you still see it as a fool’s errand to do so? Thanks again!

1. ~75/25 before and ~70/25/5 now with the 5% being some cash that has flowed in of late. I have some pending expenses that will use some of that and once I have a firm handle on those the balance, if any, will go into VTSAX.

2. Under 10 and over 45 would be very extreme levels and would certainly prompt me to take a look. But I would be very slow to act on it, if at all, and very keen to understand what was behind it. But even then, just when you think you know what’s going on, Mr. Market makes you the fool.

Mr. Collins. I would love to try the paid version of Can I Retire Yet’s retirement calculate. I have tried the free version and am looking for a little more detail. BTW, I was able to convince both my daughters (11 and 13) to read your book. I enjoyed it and I think I was a great exposure for them. Thanks. Josh

Hi Jim, I’m wondering if you have access to a Vanguard Municipal bond fund in your state? I live in PA and hold VPAIX in my taxable account. It serves a couple of purposes for me. Works as a portion of my bond ballast as well as a deeper “layer” of FU money.
Other thoughts on munis
Happy holidays to you and yours!

Munis offer a wide range of benefits, including attractive current income free from federal and, in most cases, state and local taxes; a high degree of safety with regard to payment of interest and repayment of principal; and a predictable stream of dividend income. In these ways they are similar to holding VBTLX in an IRA account.

However, for very little additional risk you can increase your yield slightly and place munis in a taxable account where a “young” guy like me can actually use the funds if needed. By placing the munis in my taxable account, I not only enjoy the ballast effect of bonds with regards to equities, I can also enjoy fairly predictable current income, stable(-ish) principle, tax avoidance, and funds accessibility.

Using Vanguard’s fund comparison tool for VBTLX and VPAIX there are some other interesting points to ponder:

In each of the above comparative periods munis win. Scroll further down Vanguard’s fund comparison tool will show the after tax total return results. Again, munis come out ahead in each of the comparative periods.

Notable differences in favor of VBTLX are three:

Expenses: The muni fund is significantly more expensive than VBTLX. However, this is Vanguard so the cost is still quite reasonable.

Average maturity: the average maturity of VBTLX is 8.4 years compared to 16.2 years for the PA bond fund. This is a pretty minor difference as we are talking about bond funds vice individual bonds.

Size: VBTLX includes a significant chunk of national level US Treasuries. These are invested in by people and corporations all over the world. PA municipal bonds are issued by the governments and other authorized entities of the state of Pennsylvania. Thus, the tax base of munis is far smaller.

Notable differences in favor of VPAIX:

Accessibility: Munis are typically held in a taxable account thus they can be tapped for whatever “emergency” happens to arise with little fuss and no (or very few) tax considerations.

Performance: For very little additional risk or cost VPAIX yields an additional ~1.5% (+/-) year over year for the past many years.

Source of income: While US treasuries are backed by the “full faith and credit of the United States,” municipal bonds are funded in similar manner. In both cases the issuing governments have the power to tax (or levy fees) on their constituents to ensure bond payments are made. Corporate bonds (the other significant chunk of VBTLX) do not have this power.

So tax bracket considerations aside, I invest about 20% of my bond holdings in VPAIX in my taxable account. This slice serves primarily as typical ballast to stock gyrations; similar to any bond holding. However, given the location of the funds, I can tap into munis on that nasty day when the market crashes and I need a new motorcycle from the local dealership’s going out of business sale (or other emergency).

While the money is in the muni bond fund the principle is relatively stable and the yield is better than most CDs and other bond funds (especially on an after tax basis). I can withdraw some or all of the funds without any penalties or tax considerations with the possible exception of some small capital gains. I also have the knowledge that I’m investing in projects that help my local infrastructure. I love you guys in the other 49 states, but I primarily drive on PA roads and my kids attend PA schools.

Jone, great points and I do the same as you except I’m in California so I hold VCAIX in my taxable account. I want to have a good chuck of money in my taxable account that I can take out at any time for larger purchases or emergencies but don’t want the volatility of only stocks. Thus, I keep VCAIX & VTSAX in my taxable account to get the benefits of both without the tax inefficiencies of keeping VBTLX in my taxable account.

Ha I was happy you addressed the question of a potential crash around the corner… My heart stopped for a sec and I almost thought everything I learned from you was a lie if all of a sudden you were predicting the market.

As a teacher, I have to be very careful about using sarcasm with my students because sometimes they don’t get it even when it is clearly the opposite of what makes sense. Luckily this comment is buried in the comments so only astute readers will get to it…. We don’t want anyone crowding us out of our Bitcoin trade! 😉

Thanks for the update Jim. I appreciate you sharing the update of your experiment. As I’m still in the accumulation phase I’m mostly in equities. I’ll be sure to come back to this post when it’s time to reallocate more towards bonds.

Love the audio book, and especially the readers voice. :). . also have a lump of cash and can’t see myself putting it in vtsax with a market so high. Maybe should go to vbtlx until it calms down.
Also recommending everyone who has any interest in controlling their finance to your blog and book. Thank again for you great insight.

I’ve been reading your blog for a few years now and am fully on board with the VTSAX strategy. If anyone asks me for investment advice I tell them “Vanguard’s VTSAX” and refer them to “The Stock Series” and “The Simple Path To Wealth”.

Someone asked me a question that I haven’t been able to answer: If the market is expected to increase in the long run, why not invest in a leveraged bull ETF (such as TQQQ or UPRO)? The expense ratio is higher at around 1%, but the leveraged gains in the long run should more than offset this.

The main problem is that leverage can completely wipe you out in a down turn. Game over.

If you are leveraged 2/1 and the market drops 50%, you are flat broke. Un-leveraged you have lost 50% of your investment. Painful but you still own the same number of shares that can rebound on the recovery.

I’ve bought the Kindle version, but epub’s are far superior in my eyes and converting the kindle version to an epub doesn’t work for me… (I can’t underline sentences in a converted version which is essential).
I’d personally happily pay you $20,- for a perfect-working .epub version of the book and I have to think that goes for more people…

Most of my assets are outside of retirement funds. Does anyone here remember what Jim recommends in that situation? Keep all bonds in retirement funds and stocks outside? I ended up with municipal bonds since I’m in the highest tax bracket.

Thank you Jim for all of your wisdom and another great post! I have personally enjoyed your book and have shared it with my family. May I also have access to Darrow’s Pro version retirement calculator. Thanks a bunch!

Forgive my ignorance if I am asking a stupid question but is this https://www.cnbc.com/2017/08/04/greenspan-bond-bubble-about-to-break-because-of-abnormally-low-interest-rates.html
related to what we are discussing here? And if yes how? Let me be clear, I’ll chose good old Jl advice over Greenspan’s any day (no I am not looking to hit you with favors or loan requests, don’t worry) and the reason is because it makes 100% sense to me and I understand it. So this is what I am looking for, to understand better. I thought bonds were for oldish, totally averse to risk, kind of folks, what is this crash talk now?

The idea is that interest rates are so low they can only rise from here and rising rates mean lower bond prices. The longer the term, the greater the risk. So if this is a big concern for you, short-term treasuries are your best bet.

But as always, just because someone is predicting a crash doesn’t mean it will happen or what it will actually look like if it does.

Timely! I just rebalanced into VBTLX earlier this week — now at 25% VBTLX, 10% VTIAX, 7.5% VGSLX, 57.5% VTSAX. A little more complicated… but international equities have been treating me well for the last couple of years and I like a bit of exposure there.

Planning for FIRE effective 2030, I projected our retirement accounts would be up 25% from 1/1/17 to 1/1/18. We’re wildly beyond that at 37%, so I figured I could comfortably shift a bit more into bonds just in case there’s a fire sale on stocks coming up. It’s a nice feeling.

So many numbers. At her desk my wife is probably rolling her eyes at me so hard right now and wondering why.

Season’s greetings to you and yours. Thank you for all you’ve done over the last year, for me and countless others!

Agreed on the approach to bond allocation. I was about 50/50 stocks/bonds during the runup to my retirement in the early 2000’s. And the performance of bonds then was a nice tailwind, probably not to be repeated anytime soon. Now, I’m happy with that same allocation with an eye not on the performance of our bonds, but as a stable counter-weight to stocks for producing retirement income, as needed.

Great advice as always. Personally I’m 100% VTSAX as I’m still in the wealth accumulation phase and see no reason to “play it safe” by adding bonds.

My question: Somewhere on this blog (maybe an article, maybe a comment) you toyed with the idea of going 100% VTSAX and accepting the “wild ride.” Is that still a possibility for you, or have you ruled it out? I’m just curious on your thoughts either way.
Thanks and happy holidays!

True enough but, as always, I look at it a bit differently. The greater your level of wealth the better you can withstand the volatility of stocks. This puts you in a strong position to go for performance. Plus, even at my advanced age, I am investing for the long-term. My wife will very likely survive me by a couple a decades and beyond that I am investing for future generations.

2. In the last couple of years some of my business interests have begun throwing off cash such that we are no longer drawing on the portfolio. For now I am uncertain if or how long this might last. But if it starts to look sustainable, that would push me towards 100% stocks.

I retired a couple of years at the ripe age of 57 because of accelerated savings, sticking to consistent investing through the global financial crisis of 2008-2009 and being cheap. Actually, my daughter says I’m not cheap, I’m economical. I shudder to think how much better off I’d be if I knew of the advice of Jim, MMM, Darrow Kirkpatrick and all the others 40 years ago.

Jim’s book is awesome and if you haven’t read it yet, get it now. I’ve simplified my traditional and Roth IRA’s with the two primary funds of VTSAX and VBTLX. But, recently I chickened out and sold a little of the stock in the traditional IRA and have it in money market and CD’s. Why did I do this? Jim’s guest post by A. Noonan Moose got me to thinking of sleeping soundly through a market crash.

And Jim you do NOT need to send me the code as I, after reading Darrow’s most recent post, purchased PRC Gold to help determine cash flow, Roth conversions, etc. Sorry Darrow but I wanted a desktop version.

Hi, I’m 51 and try to figure out if I have enough money to retire soon, this tool seem to be well done to run simulations and it could probably help me, if you still have code I’ll appreciate.
Thanks for work, I’m a big fan

Hi Jim,
I very much enjoy reading your blog, and it’s one of the few I really look forward too. Now, sparked by the last photograph of your column, I’m wondering whether you plan to remain at your beach house through the Wisconsin winter?! I grew up in Michigan myself, near Detroit, but away from the massive snow drifts along the water. I now live in Baltimore, where it’s comparatively warmer and sunnier. I remember those drifts can get high and windy! FWIW I’m on a slower track to FI. I could probably claim FI now if I moved to a cheaper locale and got rid of one of our cars…

This winter we are as the work on the place continues and our daughter is visiting. Longer-term, we’ll go back to the full time travel and spend a month or two here each year spring & fall. That will open it up for the lucrative summer rental season and allow us to flee each winter to someplace warm. Or at least not as cold. 🙂

Thank you JL. I had been in VBLTX and have since changed to VBTLX after this article and checking the long term graphs on both of these. VTLTX has a higher return currently (along with higher costs) and has been worse. Like you said, bonds are for stability and VBLTX is not as stable as VBTLX.

Hi there Mr. Collins – a big, great thanks to you and your willingness to share with and support the FI community. I’m a whippersnapping 26 years, and excited for how much my future has opened up as I improve my practices with money – currently at a 75% savings rate. I hand-wrote you a letter expressing my concerns about a soon-coming inheritance. Could I email you images of the letter? I want to ensure I am responsible with such a great gift, as responsible action provides me greater opportunity to improve others lives in the future.
Cheers, William

Congratulations on your 75% savings rate. That bodes well for your handling of the coming inheritance.

Unfortunately, I don’t provide personal consultations. However, if you read thru this blog and/or my book you’ll have an excellent idea of the advice I’d give. More importantly, the reasons behind that advice as well.

Appreciate you coming out with a full post here. I was the one who asked a question you answered on the ChooseFI podcast about this very issue.

I have about $20,000 in a Coverdale account for each of my children, now age 15 and 17, for college. I had it all in the market (VTSAX of course) and then moved to a bond fund (VICSX) in August. I’m in the wealth preservation stage at this point. Would VBTLX be the best place to protect this principle or would cash be a better spot. Obviously the super low interest rates are a concern to me as it seems the only place they will go is up.

Thanks for this series. I’ve read it all and all the comments at least twice. Grateful for all you do! Matt

You are right to be concerned about interest rates. When they rise again it will be tough for bonds, especially if the rise is rapid. So cash is a bit safer, at least in the short term. Longer term, the value of cash is eroded by inflation.

In short, there is no perfect solution but for the reasons I explain in the post for me VBTLX is the best choice.

Wanted to add a military wrinkle to the discussion: We (Spousal Unit & I) followed rules-of-thumb about asset allocation (% stocks/bonds) UNTIL we reached military retirement. Once that guaranteed pension was locked in, we became much more aggressive with our allocation. In fact, after reading an article Doug Nordman wrote over at the-military-guide.com that referenced the book “Are You a Stock or a Bond?,” we decided that a military pension easily met all the same parameters as investing in bonds, so we transitioned to a nearly 100% equity position. [Your writings helped influence this decision too, of course! ;-)] Admittedly, this was an easier decision since we live well below our means and the pension itself covers all of our living expenses.

I know not many folks have pensions these days, but I throw this out there as food for thought. Whatever path you take to get to FI, as you say, “The greater your level of wealth the better you can withstand the volatility of stocks.” In our case, the guaranteed income each month and our low overhead allows us to invest our other assets for growth, rather than income or preservation.

Hi Jim,
I want to open vanguard accounts (VTSAX) for my 2 teenagers (16 and 12) but I want to make sure that when they are on their own they can just take them over. These would be regular taxable accounts that will be started with saved gift money ($5k each) and I will add $200 per month to each and they will (ideally) just let them grow for 40+ years. When they are each on their own and take over each of their accounts, they will continue the $200/month deposit. So in other words, i want to make sure that they can just assume ownership of the accounts when they are adults and avoid having to sell the shares to open new accounts under their own names. Do you know if that’s possible? (A “seamless” transfer of ownership at the age of 22 or whenever they finish school). I’m guessing it would have to be a UTMA account to start because they are minors but can they must take them over when they are adults? BTW, i don’t care if it interferes with their financial aid eligibility when it comes time for college. We plan on funding their college out of pocket without any loans.

I showed them a savings calculator and explained how money begets money and they are super STOKED about getting started. You’re right once they are of age they’ll be able to do what they wish with the money but my plan is by then they will be so conditioned to letting it grow and adding to it on a regular basis.

My father-in-law wants to sell my husband and me his Florida condo for $1. He is worried about losing the condo to medical fees in the event of needing Medicaid to cover potential long-term care. He has made a good middle-to upper-middle class living, but is a big spender and has never saved any money for retirement.

The idea is that we would take ownership but he and his wife (my husband’s stepmother) could still use it a few times a year throughout their lives. They are about 70 and perfectly healthy. But now we would pay the taxes and condo fees and also do the work of renting it out for 6 months a year (the maximum allowed) which currently more than covers the annual costs.

On one hand, this is a roughly $125,000 value being given to us, which is nice. And the motivation is pure–protecting this asset from being eaten up by health care costs. On the other hand, this puts us on the hook for ongoing condo fees, taxes, and costs and/or the hassles of covering those expenses by renting the place out.

If indeed my father-in-law does end up in asset shredding long-term care, this will turn out to have been a good way to save the condo. But if my father-in-law doesn’t end up in long-term care, we will have taken on a big burden many years earlier than necessary just to get something my husband would have ultimately inherited anyway. Or worse, if my father-in-law needs the money for something not covered by Medicaid, like in-home care or just other old age expenses, we could end up taking on 10 years of condo expenses/hassles only to feel obligated to sell the condo and give him all proceeds. Or maybe he’ll need to live there full-time instead of just vacationing there, rendering our “ownership” an expense without any benefits in terms of our own potential use of the condo.

Do you have any thoughts on how to handle a situation like this? A) Should we do it? B) How should we talk to my in-laws about it?

First, I have to start by saying I am ethically uncomfortable with strategies like this that seek to shift the burden of care and its cost from those who have resources to the rest of us taxpayers.

That said, if you and your in-laws go this route be very careful that you understand the limitations of this approach. The government has guidelines designed to block such approaches. So do your research.

It sounds like this is a vacation condo? If so, your in-laws are pushing you into being Airbnb-type landlords which is a part time job. You seem to have a pretty good handle on what this will entail. Run the numbers. With effort it could be profitable.

Further, it sounds like they aren’t giving you the condo but only putting it in your name until/unless they need it or don’t.

Again, it sounds like you have a good read on the deal. It would not be for me, but only you can decide if it is for you.

Random question for the crowd: I currently have all my bond funds in taxable due to poor choices in my 401k. My company just added VBTLX to my 401k options, so I’m going to add that. I have VBTLX and VWITX in my taxable account. I’d like to nix VBTLX in my taxable and switch to a different bond fund so that I can engage in tax-loss harvesting without running afoul of the wash-sale rule after adding VBTLX in my 401k.

Any suggestions for a good alternative bond fund to replace my VBTLX and pair with VWITX in my taxable account? Thank you!

That said, the advantage of VTBLX is that it has bonds of all maturities and bonds acquired at many different times. So there is a steady flow of bonds reaching maturity creating new money to buy the new, higher interest rate bonds.

But still, it too can be expected to take a hit with rising rates, especially if that rise is fast.

The risk to benefit ratio of VTBLX concerned me in early 2017 due to low interest rates, so after reading great articles on CDs from Harry Sit and Allan Roth I moved 2/3 of my VTBLX into 3% CDs with a low early withdrawal penalty and the other 1/3 into shorter duration VBIRX (kept for rebalancing). Time will tell if it was a good move, but after a year no regrets. If anything I keep wondering why I don’t move my VBIRX into a money market fund.

I read your “if you can’t buy vanguard” article but I didn’t what I was looking for.
My brokerage only allows me to buy Ishares commission free and they seem to have similar or better ERs than VG.
Would you be ok with someone using :
-ITOT instead of VTSAX (VTI)
-IUSB instead of VBTLX (BND)
Thank you JLC. Big fan

Both ITOT and IUSB closely replicate the same portfolios in VTSAX and VBTLX, so you should be fine with them. Just keep a close eye on the ERs. These can be changed at anytime and, unlike VG which is always seeking to lower costs, other investment firms have a strong financial motivation to raise them.

Also, you can buy VG funds directly thru VG at no charge, so there is no reason to go thru a brokerage.

What are your thoughts on using VBILX as a replacement for VBTLX? When comparing the two I see that VBILX seems to be VBTLX minus the MBS. VBILX has better 5 and 10 year returns, still retains good credit quality, has similar duration and performed better during 2008 than VBTLX. I am torn between the two but went with VBILX in place of VBTLX in my IRA. Your thoughts? (By the way, I really enjoyed your interview by the Mad Fientist. It changed my AA philosophy a bit.) Thanks.